Question: Suppose Amazon.com Inc. pays no dividends but spent $2 billion on share repurchases last year. If Amazons equity cost of capital is 8%, and if

Suppose Amazon.com Inc. pays no dividends but spent $2 billion on share repurchases last year. If Amazon’s equity cost of capital is 8%, and if the amount spent on repurchases is expected to grow by 6% per year, estimate Amazon’s market capitalization. If Amazon has 450 million shares outstanding, what stock price does this correspond to?

Step by Step Solution

★★★★★

3.55 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

There is no major difference in share repurchase and dividends Just ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

317-B-C-F-G-F (344).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucents debt cost of capital is 6.1% and...

Suppose Cisco Systems pays no dividends but spent $5 billion on share repurchases last year. If Ciscos equity cost of capital is 12%, and if the amount spent on repurchases is expected to grow by 8%...

On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. The company has a 5% cost...

Suppose Amazon.com, Inc. pays no dividends but spent $2.98 billion on share repurchases last year. If Amazons equity cost of capital is 7.6%, and if the amount spent on repurchases is expected to...

Suppose Amazon.com Inc. pays no dividends but spent $1.88 billion on share repurchases last year. If Amazons equity cost of capital is 8.1 %, and if the amount spent on repurchases is expected to...

answwer questions 5,6 and 7 with full answers and steps 5) Devon Oil Services suffered a large loss and suspended its dividend. Suppose you do not expect Devon to resume paying dividends until...

Question Help Suppose Amazon.com Inc. pays no dividends but spent $ 2.84 billion on share repurchases last year. If Amazon's equity cost of capital is 7.9 % and if the amount spent on repurchases is...

Please show all work for calculations. Thanks you Suppose Amazon.com Inc. pays no dividends but spent $3.02 billion on share repurchases last year. If Amazon's equity cost of capital is 8.3%, and if...

Suppose Compco Systems pays no dividends but spent $5 billion on share repurchases last year. If Compcos equity cost of capital is 12%, and if the amount spent on repurchases is expected to grow by...

Suppose Compco Systems pays no dividends but spent $ 4 . 9 3 billion on share repurchases last year. If Compco's equity cost of capital is 1 1 . 7 % , and if the amount spent on repurchases is...

The flex in the flexible budget relates solely to variable costs. Do you agree? Explain.

An environmentalist collects a liter of water from each of 45 different locations along the banks of a stream. He measures the amount of dissolved oxygen in each specimen. The mean oxygen level in...

You are certain that your co-workers see you as a cranky, reclusive hermit. Actually, they think of you as a shy person who is quiet but nice to be around. How can this difference between...

Identify the elements of the personal selling process. Must a salesperson include all these elements when selling a product to a customer? Why or why not?

Ethical Considerations take a look back at example 5.7 is it deceptive advertising? Is it unethical to advertise a future value like this without a disclaimer? To answer the next five questions,...

Please find NVP and IRR. EXPLAIN YOUR ANSWERS. Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader...

paid by a firm in which Hulett owns 8 5 percent of the shares. Use the corporate tax rates shown in the popup window, _ , to Comcute the corporation's tax liability. What are the firm's average and...

Suppose today a mutual fund contains 2,000 shares of JPMorgan Chase, currently trading at $84.75, 1,000 shares of Walmart, currently trading at $83.10, and 2,500 shares of Pfizer, currently trading...